Let’s explore this question. First, why share data at all?
Data Sharing Advantages
Within the financial services ecosystem, sharing financial data can be a boon to your ability to do business. For example, think of payment apps like Venmo, PayPal and Stripe. By enrolling with them and sharing data, you are able to move funds more efficiently. Additionally, sharing data with lenders like Rocket Mortgage can speed up the mortgage application process.
Many people have multiple accounts with multiple financial institutions (401k, mortgage, checking, savings, credit card, auto loan). Managing one’s finances can become confusing and difficult. Personal finance apps came along to give consumers a 360-degree view of their finances. What do we mean by that? By sharing your data with these apps, you can see all your accounts in one place and get a clear picture of your assets and liabilities.
There are literally thousands of applications and processes that benefit you when you share your data. After all, that’s what you do when you fill out paper forms: you share personal data. But you share less securely and you share less efficiently.
So, sharing can be a good thing and it can help you achieve financial goals (for example, buy a house, save for college, retire).
Data Sharing Tug of War
Today, financial institutions serve as guardians of financial data. In the past they processed and protected the data under the premise that the data was theirs. More recently, banks and regulators see financial data as belonging to the consumer. It’s your data, you should be able to share it if you so desire, though banks remain responsible for safeguarding your data.
Having said that, there exists an intriguing tug of war between the fintechs and the financial institutions. Fintechs want to open the data floodgates without restriction. Why? More data means better AI algorithms. More data helps them sell more stuff and make more money.
As such, financial institutions are resisting the urge to share data too openly. This is because they have regulatory as well as fiduciary responsibilities over your data. Now they are working to provide consumers with better protections and controls over their data. They are also trying to provide greater transparency over where your data is going when you share it (hint: it doesn’t just go to Venmo or PayPal).
So, what’s the right balance? It depends.
It depends on what you want to do and who you will share data with. You need to understand the risks and balance them with the rewards. So always check on a vendor. Look at their ratings, their reputation and ensure you can trust them.
Please watch our webcasts on the Perils of Screen Scraping to learn more.